e. ratification is accomplished expressly or
the injured party himself, provided, he is
impliedly by a waiver of action to annul
8. Right to ratify - transferrable to the heirs of the party
who has the same right.
9. Article 1393. Ratification may be effected expressly or
tacitly. It is understood that there is a tacit ratification if,
with knowledge of the reason which renders the
contract voidable and such reason having ceased, the
person who has a right to invoke it should execute an
act which necessarily implies intention to waive right.
10. Kinds of ratification:
a. Express ratification – when the ratification is
manifested in words OR in writing
b. Implied ratification – may take diff. forms:
i. by silence or acquiescence
ii. by acts showing adoption or removal of
the contract
iii. by acceptance and retention of the
benefits flowing therefrom
11. Requisites of implied ratification:
a. Knowledge of the reason which renders the
contract voidable
b. Such reason must have ceased
c. Injured party must execute an act which
necessarily implies intention to waive his right
12. Article 1394. Ratification may be effected by the
guardian of the incapacitated person.
13. Party who may ratify:
a. Contract entered by an incapacitated person:
i. the guardian; or
ii.
already capacitated.
b. Contract is voidable on the ground of mistake,
etc.,:
i. the party whose consent is vitiated
14. Article 1395. Ratification does not require the
conformity of the contracting party who has no right to
bring the action for annulment.
15. Article 1396. Ratification cleanses the contract from all
its defects from the moment it was constituted.
16. Article 1397. The action for the annulment of contracts
may be instituted by all who are thereby obliged
principally or subsidiarily.
a. However, persons who are capable cannot
allege the incapacity of those with whom they
contracted; nor can those who exerted
intimidation, violence, or undue influence, or
employed fraud, or caused mistake base their
action upon these flaws of the contract.
17. Article 1398. An obligation having been annulled, the
contracting parties shall restore to each other the
things which have been the subject matter of the
contract, with their fruits, and the price with its interest,
except in cases provided by law.
a. In obligations to render service, the value
thereof shall be the basis for damages.
18. Article 1399. When the defect of the contract consists
in the incapacity of one of the parties, the incapacitated
person is not obliged to make any restitution except
insofar as he has been benefited by the thing or price
received by him.
 19. Article 1400. Whenever the person obliged by the
decree of annulment to return the thing can not do so
because it has been lost through his fault, he shall
return the fruits received and the value of the thing at
the time of the loss, with interest from the same date.
20. Article 1401. The action for annulment of contracts
shall be extinguished when the thing which is the
object thereof is lost through the fraud or fault of the
person who has a right to institute the proceedings.
a. If the right of action is based upon the
incapacity of any one of the contracting parties,
the loss of the thing shall not be an obstacle to
the success of the action, unless said loss took
place through the fraud or fault of the plaintiff.
21. Article 1402. As long as one of the contracting parties
does not restore what in virtue of the decree of
annulment he is bound to return, the other cannot be
compelled to comply with what is incumbent upon him.
Unenforceable
1. Article 1403. The following contracts are unenforceable,
unless they are ratified:
a. Those entered into in the name of another
person by one who has been given no authority
or legal representation, or who has acted
beyond his powers;
b. Those that do not comply with the Statute of
Frauds as set forth in this number. In the
following cases an agreement hereafter made
shall be unenforceable by action, unless the
same, or some note or memorandum, thereof,
be in writing, and subscribed by the party
charged, or by his agent;
c. evidence, therefore, of the agreement cannot
be received without the writing, or a secondary
evidence of its contents:
i. agreement that by its terms is not to be
performed within a year from the making
thereof
ii. special promise to answer for the debt,
default, or miscarriage of another
iii. agreement made in consideration of
marriage, other than a mutual promise
to marry
iv. agreement for the sale of goods,
chattels or things in action, at a price not
less than five hundred pesos…
v. agreement of the leasing for a longer
period than one year, or for the sale of
real property or of an interest therein
vi. representation as to the credit of a third
person
vii. where both parties are incapable of
giving consent to a contract
2. Article 1404. Unauthorized contracts are governed by
Article 1317 and the principles of agency in Title X of
this Book.
3. Article 1405. Contracts infringing the Statute of Frauds,
are ratified by the failure to object to the presentation of
oral evidence to prove the same, or by acceptance of
benefit under them.
4. Article 1406. When a contract is enforceable under the
Statute of Frauds, and a public document is necessary
for its registration in the Registry of Deeds, the parties
may avail themselves of the right under Article 1357.
5. Article 1407. In a contract where both parties are
incapable of giving consent, express or implied
ratification by the parent, or guardian, as the case may
be, of one of the contracting parties shall give the
contract the same effect as if only one of them were
incapacitated.
a. If ratification is made by the parents or
guardians, as the case may be, of both
contracting parties, the contract shall be
validated from the inception.
6. When unenforceable contract becomes voidable or
valid:
a. Where both parties to a contract are incapable
of giving consent:
i. contract is unenforceable.
ii. HOWEVER, if the parent OR guardian
of either party, OR if one party after
attaining/regaining capacity, ratifies the
contract, it becomes VOIDABLE.
b. If ratification is made by the parents or
guardians of both contracting parties, or by both
contracting parties after attaining/regaining
capacity:
i. contract is VALIDATED,
ii. and its validity retroacts to the time it
was entered into.
7. Article 1408. Unenforceable contracts cannot be
assailed by third persons.
Void and Inexistent
1. Article 1409. The following contracts are inexistent
and void from the beginning:
Those...
a. whose cause, object or purpose is contrary to
law, morals, good customs, public order or
public policy;
b. which are absolutely simulated or fictitious;
c. whose cause or object did not exist at the time
of the transaction;
d. whose object is outside the commerce of men;
e. which contemplate an impossible service;
f. where the intention of the parties relative to the
principal object of the contract cannot be
ascertained;
g. expressly prohibited or declared void by law.
2. These contracts cannot be ratified. Neither can the
right to set up the defense of illegality be waived.
3. Inexistent contracts - agreements which lack one or
some or all of the elements (i.e., consent, object, and
cause) or do not comply with the formalities which are
essential for the existence of a contract.
4. Characteristic of void contracts:
a. produces no effect whatsoever, being void or
inexistent from the beginning;
b. cannot be cured or validated either by time or
ratification;
 c. right to set up the defense of illegality,
inexistence, or absolute nullity cannot be
waived;
d. action or defense for the declaration of its
illegality, inexistence, or absolute nullity does
not prescribe;
e. defense of illegality, inexistence, or absolute
nullity is not available to third persons whose
interests are not directly affected;
f. cannot give rise to a valid contract; and
g. Its invalidity can be questioned by anyone
affected by it.
5. Article. 1410. The action or defense for the declaration
of the inexistence of a contract does not prescribe.
6. If a contract is null and void, the action to declare its
existence does not prescribe. The action can be filed
anytime.
a. The mere laps of time does not validate a void
contract unlike voidable contracts if not assailed
within the specific period provided by law shall
remain valid.
7. A valid contract remains void even if no court has
declared its in-existence or illegality.
a. However, there are certain contracts the nullity
of which is not apparent on their faces.
8. Article 1411. When the nullity proceeds from the
illegality of the cause or object of the contract, and the
act constitutes a criminal offense, both parties being in
pari delicto, they shall have no action against each
other, and both shall be prosecuted. Moreover, the
provisions of the Penal Code relative to the disposal of
effects or instruments of a crime shall be applicable to
the things or the price of the contract.
9. This rule shall be applicable when only one of the
parties is guilty; but the innocent one may claim what
he has given, and shall not be bound to comply with his
promise.
10. In Pari Delicto-in equal fault; a universal doctrine which
holds that no action arises, in equity or at law, from an
illegal contract.
11. The rule that parties to an illegal contract will not be
aided by law.
12. This rule adopts the principle of “One who seeks equity
and justice must come to court with clean hands”.
13. Article 1412. If the act in which the unlawful or
forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed:
a. When the fault is on the part of both contracting
parties, neither may recover what he has given
by virtue of the contract, or demand the
performance of the other’s undertaking;
b. When only one of the contracting parties is at
fault, he cannot recover what he has given by
reason of the contract, or ask for the fulfillment
of what has been promised him. The other, who
is not at fault, may demand the return of what
he has given without any obligation to comply
his promise.
14. Rules were contracts is illegal but the act does not
constitute a criminal offense:
 a. When the parties are both in pari delicto and
the cause of contract is unlawful or forbidden
but no criminal offense
b. When only one party is guilty:
i. The guilty party loses what he has given
by reason of the contract;
ii. The guilty party cannot ask for the
fulfillment of the other’s undertaking;
iii. The innocent party cannot be compelled
to comply with his promise.
iv. The innocent party cannot be compelled
to comply with his promise.
15. Article 1413. Interest paid in excess of the interest
allowed by the usury laws may be recovered by the
debtor, with interest thereon from the date of the
payment.
16. Usury- the illegal act of charging for a loan a higher
rate of interest than that which is allowed by law.
17. Recovery of usurious interest- any rate of interest in
excess of the maximum allowed under the Usury Law
is usurious and if paid, may be recovered together with
interest thereon from the date of payment in a proper
action for the same.
18. A stipulation for the payment of usurious interest
is void- person paying the usurious interest can
recover in an independent civil action not only the
interest in excess of that allowed by the usury laws, but
the whole interest paid.
19. Article 1414. When money is paid or property
delivered for an illegal purpose, the contract may be
repudiated by one of the parties before the purpose
has been accomplished, or before any damage has
been caused to a third person. In such case, the courts
may, if the public interest will thus be subserved, allow
the party repudiating the contract to recover the money
or property.
20. Recovery where contract for an illegal purpose- the
law allows recovery by one of the parties even though
both of them have acted contrary to laws.
21. Requisites:
a. A contract that is for an illegal purpose
b. The contract is repudiated before the purpose
has been accomplished OR before any damage
has caused to a third person
c. The court considers that public interest will be
subserved by allowing recovery
22. Article 1415. Where one of the parties to an illegal
contract is incapable of giving consent, the courts may,
if the interest of justice so demands allow recovery of
money/property delivered by the incapacitated person.
23. Article 1416. When the agreement is not illegal per se
but is merely prohibited, and the prohibition by the law
is designed for the protection of the plaintiff, he may, if
public policy is thereby enhanced, recover what he has
paid or delivered.
24. Article 1417. When the price of any article or 30. Article 1422. A contract which is the direct result of a
commodity is determined by statute, or by authority of previous illegal contract, is also void and inexistent.
law, any person paying any amount in excess of the 31. This provision is based on the requisites of a valid
maximum price allowed may recover such excess. novation. An illegal contract is void and inexistent and
25. Article 1418. When the law fixes, or authorizes the cannot, therefore, give rise to a valid contract.
fixing of the maximum number of hours of labor, and a
contract is entered into whereby a laborer undertakes
to work longer than the maximum thus fixed, he may
demand additional compensation for service rendered
beyond the time limit.
26. Article 1419. When the law sets, or authorizes the
setting of a minimum wage for laborers, and a contract
is agreed upon by which a laborer accepts a lower
wage, he shall be entitled to recover the deficiency.
27. Article 1420. In case of a divisible contract, if the
illegal terms can be separated from the legal ones, the
latter may be enforced.

28. Article 1421. The defense of illegality of contract is not

available to third persons whose interests are not
directly affected.
29. Persons entitled to raise defense of illegality:
a. Third persons are NOT allowed to bring an
action to annul OR assail a voidable and
unenforceable contracts.
b. HOWEVER, if the contract is illegal OR void,
even a third person may avail of the defense of
illegality or set up its illegality
c. as long as his interest is directly affected by the
contract.